2021 saw unprecedented growth in the housing market as it skyrocketed alongside relentless buyer demand. This, however, led many to believe we were creating a housing bubble that would inevitably burst. Mortgage rates hit record lows—as did the inventory of homes for buyers to select from—and homeowners refinanced at record speed to take advantage of the unprecedented rates. A sharp rise in demand for home appraisals followed.
The good news is that many experts aren’t predicting any significant changes that would acutely challenge the housing market this year (nor burst any housing bubble). In fact, the housing market is expected to eventually become more balanced in 2022—but don’t unbuckle your safety belt just yet, we’re still in for somewhat of a wild ride as things simmer down.
To get you prepared for what’s to come in 2022, here are six trends to look out for.
1. Housing Volume
One of the biggest factors in last year’s housing market boom were historically low mortgage rates. This year, these rates are expected to rise, leading to a decline in the growth of mortgage originations. With higher rates and fewer qualified buyers, refinance originations are expected to drop 62%. A projected 20-30% decrease in housing volumes means appraisers can expect to also see a decrease in demand for appraisals.
2. Heightened Fees
Due to the increased demand for home appraisals in 2021, the fee structure of appraisals reached higher numbers than usual, stretching appraisers thinly across the market. The good news is that, in 2022, with housing market volume dropping to as low as 30%, home appraisal fee pressure will also lighten up.
3. Minority Discrimination
A study by Freddie Mac found that homes in minority neighborhoods were undervalued by as much as 23%, widening both the appraisal and wealth gaps between minorities and non-minority households. Racial bias in the housing market in general—especially in home appraisals—became such a widely discussed topic, that a task force was formed to help resolve the disparity. The Property Appraisal Valuation Equity Interagency Task Force (PAVE) aims to rectify some of the issues that were uncovered in 2021, and make recommendations to improve best practices, consumer and professional education, and the transparency of qualified industry data.
4. Decline in Licensed Appraisers
A significant issue that continued to affect the appraisal industry is a shortage of credentialed appraisers. In 2021, there were 3,000 less qualified appraisers than in 2020. While this number is not expected to rise this year, it may see some growth with recent diversity, equity, and inclusion efforts of PAVE and other organizations.
5. Turnaround Time
The reduction in appraiser supply coupled with increased demand for home appraisals in 2021 led to a surge in turn time, with the average time range expanding from 9-12 days prior to 2021, to 8 to 21 days in 2021. With home sales slowing down, these turn times are expected to improve to about 8-10 days as appraisers return to a more standardized production volume. This will, of course, vary dependent upon appraiser supply, rural locality, and other factors.
6. Process and Policy Changes
Appraisal waivers saw an uptick in 2021, but will diminish this year due to a decrease in refinancing requests. Additionally, hotly-debated desktop appraisals will be brought to life, as well as other innovations leaning on technology to improve appraisal processes and address issues that are currently challenging the industry.
The changing landscape of the housing market in 2022 brings about some much-needed balancing that will shape how the industry progresses to provide better processes, productivity, and diversity. Appraisals Unlimited is proud to keep our thumb on the pulse of these advances in the real estate industry, to always ensure we provide our clients with extensive knowledge, superior customer service, and customized commercial and residential appraisal solutions.
If you’re interested in learning more about these solutions or need an appraisal today, don’t hesitate to contact Appraisals Unlimited, either by calling 781-449-7600 or emailing us at office@appraisals-unlimited.com.
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